By Rick Weinberg, Editor, California Business Journal.
WHEN FIRST ENERGY CORPORATION REALIZED THAT 90 PERCENT OF ITS WORKFORCE WAS GOING TO RETIRE WITHIN FIVE TO SEVEN YEARS – and that it took that long to train new employees – the company panicked.
That was back in 2009, when very few CEOs, COOs and other business executives knew about workforce strategies, knowledge capture and transfer, and integrated management systems, which ties all the elements of a company together, enhancing productivity and profitability with a proven quantitative metric system.
Even today, few CEOs and executives know about these important issues and how to solve them.
So when FirstEnergy panicked, it turned to one of its senior executives, Brian Wilkins, to fix the problem.
The task was daunting.
“We were in a real bind and it was quite evident to everyone in the company,” he says. “We were at the point where we hadn’t hired anyone in 20 years. We laid people off and early retired people, but we didn’t hire anyone.
“Upper management — and our entire workforce — was very aware of our dilemma. It was on the top of our minds. We talked about it in conversations every week. The union people kept saying, ‘Hey, you better start hiring someone because it’s going to take time to bring people up to speed. The day will come when you’re standing here without anyone because I’m going to retire. I can’t stick around to help you out of this mess.’”
So Wilkins was asked to come up with a means to capture knowledge and transfer that knowledge to the next generation of power plant workers.
“I had no idea what that meant,” he says with a laugh. “It took me a while to get my head around it. What do they mean by knowledge capture and transfer? I had come up the old way – you learn a little from this guy and a little from that guy. Clearly, going forward we could not do that anymore. Those days were long gone – and it was all new to me.”
“I wanted a comprehensive on-the-job-training program,” he says. “I was researching, making phone calls, sending emails. Most of the companies I found had CDs of multimedia training that they wanted to sell you. But that’s not want I wanted. We wanted a custom-made on-the-job-training program.”
After all, “not one size fits all,” as he points out.
His search finally ended with the discovery of Interliance Consulting, Inc., a California-based company that specializes in workforce strategies, knowledge capture and transfer, and the development and integration of fully integrated management systems. These systems enable energy companies to not only help run their operations more effectively while saving money and being more profitable but also comply with all safety and compliance regulatory issues.
What Interliance did for FirstEnergy in the assessment phase of the project was create a “road map” of on-the-job-training, knowledge capture and transfer strategies, workforce strategies and an integrated management system.
“It turned into a ground-breaking project for the utility sector,” Wilkins says. “No one in our industry had ever done this before — knowledge capture and transfer, formulizing on-the-job-training, implementing a full-scale management system. It was just not the way things were done in the industry. When people heard what we were doing, they looked at me like I had three heads. They’d say, ‘You’re doing what?’”
New employees were given the Interliance workforce training manual “to get up to speed rapidly – and I mean rapidly,” Wilkins says. “We’re talking 18 months.”
Previously, it took between two to three years.
The on-the-job-training modules clarified what operators, mechanical and electrical maintenance employees need to do with every task, step by step. The company still follows the modules to this day.
Wilkins says the management system helps save FirstEnergy nearly $5 million annually.
The workforce development manual includes standardized employee development strategies, standardized employee skill definitions, standardized roles and responsibilities, standardized measures of success, and building a common culture of how employees are developed.
“It helped us put out trained qualified employees that could actually take over the reins,” Wilkins says. “It was amazing. No one could believe it. Before I retired, they gave me a national award for doing this because what we did was so far out of box.”
The executive who took Wilkins’ job after he retired did an audit to see how the management systems were working. He told Wilkins, “This is great – this is the way everyone should be doing it. This makes sense.”
Interliance’s approach to training “is perfectly drawn out and executed,” Wilkins says. “They take each and every specific job and break down each one to its tasks — mechanical maintenance, power plant operations, electrical maintenance, instruction and control maintenance, yard operations, everything.”
Interliance’s team went to FirstEnergy’s power plants and spoke with each person in the skills sets, and put together a comprehensive list of tasks that the employees were responsible for accomplishing on a daily basis.
Once the training module portion of the management system was complete, the next element encompassed compliance and internal and external audits.
The system required FirstEnergy to do an audit on itself every six months.
Wilkens says the only way for the new management system to function effectively was for his employees to be up front, honest and accountable. “To be all in,” as he says.
“I held myself accountable so I held others accountable. If we were all accountable and lived up to expectations, the system would work — and that’s exactly what happened in this instance.”
Wilkins would go through all the records, page by page, line by line, item by item.
“We required every ‘I’ to be dotted,” he says. “We told the employees that they were going to be held to a very high standard. And we said, ‘We’ll be back every six months to check. And you don’t want to cheat because we’ll catch ya and if we catch ya, it won’t go well for you.’
“We weren’t playing favorites. It upset everyone initially. They weren’t used to that kind of oversight. Previously, the oversight was the good ‘ol boy method: ‘Hey you’re my buddy. I’ll let you slide this time.’
“But I told everyone up front that I was not going to let anyone slide. I said, ‘I’m not letting myself slide, and if I let you slid that means I’m sliding, and I’m not going to slide. That’s not how I work.’ They rapidly came up to speed on that.”
Another element of the management system was the execution of the on-the-job-training being tied to the workforce’s performance reviews and salaries.
“If a guy screwed up, it would cost them money,” Wilkins says. “If you kept screwing up, it would cost you your job. That was part of the performance evaluation. It was not only part of your performance, but also part of your bosses’ evaluation as well.
“If there’s one thing that will keep people honest, it’s if they’re looking over their shoulder knowing it’ll cost them money if they screw up. Suddenly they stop screwing up.”
Wilkins was astonished by the reaction of his employees once they saw firsthand how effective the management strategies were.
“I can’t tell you how many times I had guys who worked there for 25 to 30 years come to me and say, ‘You know Brian, this is not only teaching the young guys but it’s making us better for the time we have left here. I’m being reminded of all the things I forgot to do years ago.’ They said the system was making more effective and safer workers out of all of them because it’s easy to get into rut and take the easy method.”
“The system made a huge difference. One thing we saw is operational errors go way down.”
Wilkins says a management system “is invaluable” – not only to energy and utilities companies – but “to all companies,” he adds. “Doesn’t matter what type of business you’re in, an integrated management system is vital.”
What Interliance has created is “the perfect formula for a management system,” Wilkins says. “What they do is they apply expert knowledge to their methodology. They marry those two and come up with the right things to do and the right way to get them done.
“It’s the ideal formula for success,” he concludes. “Every company needs this.”
Safety is Vital
Wild Well Control Inc. in Houston, Texas, the world’s No. 1 oil and gas well control emergency response company, uses a management system built by Interliance Consulting. Wild Well initially wanted the management system for safety purposes, yet it soon realized that it enhanced its entire operation.
Handling an oil well or oil rig blow out is dangerous business, and there is nothing more vital to Wild Well Control than safety – the safety of its employees, the safety of the equipment it uses, the safety of every facet of its operations.
As Wild Well Control’s VP of Health, Safety and Environment (HSE) Casey Davis says, “We have a commitment to our employees’ well-being. Our company would not exist without the skills, expertise and services that our employees bring to our organization. Secondly, regulation demands that we provide a safe environment for our workforce. Third, we discovered there is a fiscal benefit to having safe operations.”
Those safe operations are the result of a HSE management system designed, created, and implemented by Interliance Consulting.
“With this management system, we’ve lowered our underwriting costs and reduced our equipment and personnel losses to zero,” Davis says. “We avert injuries as well. Plus, our demonstrated safety commitment has allowed us to work for first-rate companies. Those companies expect safe operations and know we will be in full compliance when we’re at their facility.”
Davis says the management system saves his company more than $2 million annually.
Additionally, Wild Well Control can clearly demonstrate that its integrated HSE management system is equal to the vital importance of its safety commitment and the dangerous nature of its work.
When regulators conduct an audit of Wild Well’s safety system, they can tell that it has done its work ahead of time and is fully compliant with the regulations.
“It’s very unusual to have an HSE management system that is compliant to multiple regulatory regimes and is also an effective management tool. That’s how thorough our management system is,” Davis says.
“Our HSE system today is fully compliant with the regulations that impact our global operations,” he says. “It supports the operational elements and situations that we can, may or will encounter. Yet, it’s very pragmatic. Our workforce knows what to do in almost any situation, and if not, they can quickly find the answer using management system procedures. It’s our solution to knowledge management.”
“We see many oil and gas operations that would benefit from a modern management system and emergency response plan,” he says. “One-third of the calls we get each year could have been avoided or reduced in severity by the use of a proper contingency plan or management system.
“We excel in a very dangerous work environment,” he adds, “so it’s imperative to have an effective management system. It’s worth the investment. It not only hits the bottom line directly from a savings standpoint, it helps meet compliance regulations and ultimately saves lives.”
So, what determines an effective management system and how is it created?
The main purpose of a management system is to assure that all levels of the organization make and execute better safety decisions. The project team accomplishes this by re-engineering existing business functions and processes so every employee from CEO to field technician understands and executes the company plan.
An effective safety management system features six elements: clear policy and management processes; performance measurement and feedback; accountabilities; risk management and planning; effective employee training and evaluation; and routine reviews.
Architecting an integrated management system is similar to an engineering construction project, utilizing multiple detailed steps to create a solid finished structure. The project team must combine functional and process aspects of safety performance with other relevant functions in the organization such as maintenance, operations and engineering. This requires balancing stakeholder needs, regulations, and management requirements in combination with the basic practicalities of day-to-day field operations.
Implementing the management system is the most important — and sometimes the most difficult — stage of every project. The system doesn’t work unless it has universal understanding and support within the company.
The project team utilizes a formal management-of-change protocol covering all aspects of the transformation, ranging from senior management sponsorship and policy to detailed documentation and assignment of responsibilities. Implementation success requires training, coaching, and process testing until everyone in the company is familiar with their respective role in safety performance.
The best safety management systems are tailored to the specific needs of the company and are thoroughly integrated into everyday operations and decisions. Basic off-the-shelf systems rarely meet today’s performance standards and regulators are beginning to recognize this.
Wild Well goes through more than 50 regulatory inspections per year – nearly one per week — so its safety management system is crucial to its work and the serious compliance issues it faces.
“The regulators determine through evaluation where our health, safety and compliance management process is,” Davis says. “They want to insure our management system and processes meet the criteria of the regulations. You have to have a mature and robust management system process in place that meets the risk associated to the work we do. Fortunately, Interliance provided us with that management process.”
Companies using formal management systems experience fewer failures, respond more effectively to challenge, and deliver consistently better safety and compliance performance over time. These systems also reduce operating risk and improve profits, creating the perfect outcome — better safety and compliance improvements that pay for themselves.
“The best way to handle a potential crisis is to avoid it in the first place,” Davis says. “Our safety management system helps Wild Well do just that. I think that every energy company committed to improving safety and limiting risk should focus on upgrading its HSE management system.”
Effective Management System
When Drew Rankin was an executive at Cinergy Corporation (now Duke Energy), the company wrestled with operation, workforce and production problems that hampered overall effectiveness and profitability.
Rankin was told to straighten it out — but without the budget to make big changes. He tackled the challenge by accepting the obvious – he would have to make the existing business work better by changing how it works – and he looked for outside expertise to help make it happen.
He discovered Interliance Consulting through some associates. Interliance looked at Cinergy’s overall utility operations and determined the greatest leverage was tied to improving workforce effectiveness.
“Operating efficiency is one of the critical requirements for utility success,” says Interliance President Brad Kamph. “This is driven by the experience, capability, and focus of the workforce. Having the right people with the right skills on the job is a key to minimizing downtime and rework. We had to know what was in place before we could decide on direction.”
The engagement started with an assessment Cinergy’s existing workforce and employee-qualification program – specifically, how the qualifications, knowledge and skills of employees were tied to the company’s objectives. At the time, Cinergy had 1,600 employees in three states handling 12 different power plants.
The Interliance project team interviewed employees at all levels of the organization, from the board room to power station floor and compared the results with its experience at other utilities.
Interliance found that Cinergy used a traditional division-of-labor approach in a unionized environment: it promoted employees by seniority with the expectation that over time they’d gain the necessary skills.
However, there were no sensible measurement-based process in place to ensure that people were promoted with the necessary knowledge, skills and competence to be qualified for the new position, according to Rankin.
Using job experience as the primary training method meant that it could take years before an employee was exposed to every aspect of the job. It was a hit-or-miss process. On average, an employee knew most of the requirements, but were unlikely to be accomplished in all aspects of the job.
Also, job classifications were narrowly defined, so sometimes two or three employees with different skills were required to complete even a minor project.
The result: overstaffing and duplication were widespread, rework and downtime were higher than average, and on-time completion was a challenge.
“Cinergy was bearing the cost of a poorly-structured workforce management system in every aspect of its operations,” Kamph says. “It needed to architect a stronger approach to managing its most important asset – the knowledge and skill of its employees.”
With Interliance’s help, Rankin introduced a new workforce approach, transitioning to a model that was more of a pay-for-skills philosophy.
“As employees gained new skills, they’d be paid more,” Rankin says. “Their pay progressed as they developed breadth of skill.”
The multi-skill aspect made it a challenging endeavor. Say you have an electrician. That electrician has skills related to his field of expertise. Yet, because of Interliance, Cinergy started to look at it this way: if he has mechanical and operational skills as well as electrical skills, he’d be worth more to the company and be more promotable.
However, Cinergy didn’t have the necessary management systems in place for the transition. It didn’t have the ability to identify the skills, training and qualification processes to ensure that employees are ready for promotion.
So Interliance developed a comprehensive qualification and training program that identified the job categories and specific skills required for each level of competency. This involved clear definition of abilities and duties, competency testing protocols, and the qualification of employees against objective standards of performance.
With these tools, it became possible to evaluate every employee and identify skill gaps. Classroom and on-the-job training modules were developed to provide the knowledge needed to fill these gaps in a manageable manner.
“Switching from a promotion-by-seniority to a team-based, pay-for-skills model looked difficult, but the management system made it easy to develop and implement.” Rankin says.
Transforming Cinergy’s skill inventory and workforce utilization was a good first step. But it wasn’t enough on its own. So Rankin and Interliance shifted attention to “realigning and refocusing” employees on work activities and how they contributed to “value creation.”
To accomplish this, the project team forged a tight connection between Cinergy’s priorities and actual employee activity. This required clearly defining company objectives and then translating these objectives into the specifics of each job.
The process started with operating positions and was then repeated throughout the organization, including staff functions and IT. Eventually, employees in all power plants and other operating facilities participated.
“Employees learned that the priority and value of every action is tied to the company’s objectives,” Kamph says. “Every employee was empowered to redesign or phase out tasks with low value and reinforce ones with higher value. They were encouraged to avoid wasting time on activities that failed to create value for the company.
“Employees want to be productive and significant, so we put in place an environment and a set of tools the company used to encourage greater productivity. What changed at the job level was that every employee was given a clear line of sight from company objectives to their daily activities. This enabled employees to work more intelligently and be more productive day-to-day.”
In order to be truly effective, a management system must objectively measure and report performance at all levels of the organization.
“Honest metrics are critical to the entire enterprise,” Kamph says. “They allow you to determine success, assure alignment between activities and company objectives, and identify opportunities for further improvement.”
Cinergy calls it “our strategic measurement system,” Rankin says. “What’s important is how to measure the value of business and component operations, the connection between employee activities and company needs, and how employee skills generate business results.
“It enables process optimization,” he adds. “Measuring outputs allows us to optimize activity. We put in place a comprehensive workforce process optimization and performance management system.”
Cinergy’s challenge was to make its existing business work better by changing how it worked. What was the result?
“We fundamentally improved every key metric for assessing a power and gas portfolio in a quantifiable manner,” Rankin says. “Over a five-year period, we increased our productivity and revenue by 50%, and lowered our costs on a wholesale basis by 27%, which we equated to $270 million worth of savings.”
What Interliance brought to Rankin and Cinergy was “an enlightenment on how to run our business better,” Rankin says. “It gave us tools and insights that were previously underdeveloped at the company. Because of that, we’ve improved our leadership capabilities by knowing how to run our business better.
“If you’re not using this approach, you’re short changing your customers, shareholders, regulators, and local communities – basically, all your stakeholders.”
Copyright © 2013 California Business Journal
All Rights Reserved
Interliance Consulting, Inc.
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Web site: www.interliance.com
Contact Thomas Schultz
Copyright © 2013 California Business Journal
All Rights Reserved
Rick Weinberg is Editor-in-Chief at California Business Journal. He is a well-known journalist, writer, reporter and on-air talent who has worked for the New York Times, FOX and ESPN. He launched CalBizJournal.com to focus on California businesses and business professionals as well as California business news and information. Contact: Rick@CalBizJournal.com / 949-648-3815